What is Amazon PPC Advertising?

One of the most powerful marketing channels for Amazon Sellers is PPC (or Pay-Per-Click) advertising. Through this mode of advertising, sellers have the opportunity to buy “visibility” for their products which, in turn, leads to more clicks and sales. 

Over time businesses have realized that the ROI of PPC advertising is huge, and there are now multiple advertisers who are looking to use PPC advertising to boost their sales. As a result, competition has grown immensely since you must place a bid for a keyword you want your ad placed in. In order to ensure that your product or service stands out without paying too much in advertising costs, you must have an optimal Amazon PPC strategy in place.

There are many different strategies to optimize your PPC campaigns like implementing video marketing or using tools such as creative automation software to increase CTR, but in this article we will first understand what Amazon PPC advertising is and how it works.

What is Amazon PPC? 

Amazon PPC is a mode of advertising on Amazon where sellers pay a fee when customers click on their ad (hence the name pay per click.)  As pay per click suggests, you are only charged when someone clicks on your advertisement. There are currently three different kinds of Amazon ad types available: 

  1. Sponsored Products
  2. Sponsored Display Ads
  3. Sponsored Brands

We will first try to understand what purpose all of these ad types serve so that you can plan your advertising strategy accordingly. We will also look at some of these other types of ad strategies that you can use for multiplying your 

Sponsored Products

Sponsored Products are keyword based search terms which enable you to promote a specific product on Amazon (such as the image above.) These are the most popular types of ads that use the Amazon PPC model.

Sponsored Brands

“Sponsored brands” are ads used for brand building. They allow brands to promote a custom headline, brand logo, and up to 3 products in their ad in the top spot above Amazon search results (and other placements), with the ability to send shoppers to their Amazon Stores page or a custom landing page on Amazon. Newly available are also video ads linking to product detail pages.

Sponsored Display ads 

Finally, Sponsored Display ads send shoppers to Amazon product detail pages. They deliver relevant ads both on Amazon and on external websites to shoppers who are visiting or visited (remarketing) specific products on Amazon.

What are the Amazon ads pricing/fees?

Sponsored Products, Sponsored Brands, and Sponsored Display advertisements are purchased on a cost-per-click basis. That means that your Amazon ads are displayed at no charge—views, or impressions, are free. 

You pay for your advertisements only when a potential customer clicks on the ad. You’re in control of the amount that you’re willing to spend per click and hence the amount you spend on ads. 

How does the PPC auction work?

The cost-per-click (CPC) for each ad on Amazon is determined in a so-called second-price auction. Each advertiser submits a default bid (the maximum they are willing to pay per click) for their ad. 

The highest bidder wins the highest ad position (ad rank #1) and will also pay the highest CPC, but the highest bidder does not pay the amount they bid. The highest bidder pays only $0.01 more than the second-highest bid.

What is the Average Cost Per Click (CPC)?

On Amazon.com, the CPCs typically range from $0.02- $3, but your average CPC can vary greatly depending on the product category, marketplace location, as well as the ad type.

Setting goals for your Amazon PPC campaign

Now that we have a clearer understanding of what Amazon PPC Advertising is, let us understand the key factors you must consider while setting up an Amazon PPC campaign. Advertisers running Amazon PPC ads will already know that it can be very easy to incur a loss on your product if you’re not tracking the performance of your campaigns against your PPC costs.

In order to evaluate the performance of your Amazon PPC campaigns, you need to be clear about your goals for running Amazon ads from the outset.

Typically advertisers go for:

  • Maximizing sales (e.g. for a product launch) or maximizing impressions (e.g. for a brand awareness campaign). In this case, the costs are typically kept at a break-even level which is reflected by the so-called target KPI ‘break even ACoS’;
  • Generating incremental sales while achieving a certain profit margin which is reflected by the so-called target KPI ‘target ACoS’.

Conclusion

Amazon PPC advertising provides brands on Amazon with a unique opportunity to increase revenue and profit, and to build brand awareness. With Amazon CPC ads, you’ll always be in control of your Amazon ad fees. You set your daily ad budget, and you can decide how much to bid for keywords and ad placements. Finally, Sponsored Products, Sponsored Brands, and Sponsored Display ads offer you many different ways to target customers at all stages of the purchasing process. 

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